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Why Are Stocks Up Today?

  • A series of comments from Federal Reserve Chairman Jerome Powell have sent stocks on a wild ride today.
  • Stocks surged, then plunged, then surged again on a string of difficult-to-price-in comments.
  • More volatility is likely on the horizon, with more Fed speak upcoming this week.
Stocks up - Why Are Stocks Up Today?

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The stock market can’t make up its mind today. After spending most of the morning in the red, stocks surged approximately 1% higher following some remarks from Federal Reserve Chairman Jerome Powell. However, subsequent remarks led stocks sharply lower, losing those gains and then some, with most indices down around 0.5%. Then, the market rebounded once more, with stocks up more than 0.5% once again for the S&P 500 and the Nasdaq, at the time of writing.

Okay, so the market is clearly having some difficulty placing a value on the communication taking place today. Indeed, Powell’s high-profile speech at the Economic Club of Washington spurred some intriguing price action in the markets today. Much of this volatility appears to relate to the inability to fully understand how far and how long the Fed will hold its aggressive monetary policy stance.

Let’s dive into what Powell said, and why the market is having a difficult time pricing in these comments today.

Why Are Stocks Up Today?

Let’s start with why stocks rallied in the first place today. Federal Reserve Chairman Jerome Powell appears to be ready to break out the champagne when it comes to bringing inflation down. Thus far, his view is that a “disinflationary process” is underway. In his words, “the process of getting inflation down, has begun and its begun in the goods sector,” though there is still “a long way to go. These are the very early stages of disinflation.”

Still, that’s great news for investors pricing in a pause-and-pivot scenario.

That said, Powell did acknowledge that strong labor reports or higher-than-expected inflation readings could change the minds of central bankers. Thus, Powell’s comment that “it may well be the case that we have do more and raise rates more than is priced in” appears to have spooked the market.

On balance, it appears these remarks are being digested favorably by the markets. We’ll see which color the markets decide to end the day in. That said, one thing is for sure — more volatility is likely to come this week, as additional Fed speakers hit the podium.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

Article printed from InvestorPlace Media, https://investorplace.com/2023/02/why-are-stocks-up-today-8/.

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